Declines in Some Types of Delinquencies

The latest round-up of delinquency statistics offers some mildly encouraging news. The American Bankers Association Consumer Credit Delinquency Bulletin found that the percentage of credit card accounts issued by its member banks that were past due in the first quarter 2003 was unchanged from the fourth quarter 2002, although it remains at the highest level since the ABA started tracking card accounts in 1990. The good news was that it did not worsen, given rising unemployment. ABA Chief Economist James Chessen told the American Banker, "Frankly, I was surprised. I expected delinquencies to be worse. We haven't had a recovery in jobs, and we've continued to see the length of time people are laid off get longer. That has added to (financial) stress."

The ABA's broader, composite index of past due closed-end installment loans in the first quarter 2003 fell 4 basis points from the fourth quarter 2002 and was just 2 basis points higher than in the first quarter 2002.

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A separate report issued by the Federal Reserve Board that was also focused on banks found that over the period from the first quarter of 2001 to the first quarter of 2003, delinquency rates on consumer credit at the 100 largest banks declined significantly. Delinquency rates on residential mortgages fell from a high of 2.55 percent at the end of the second quarter of 2001 to 1.96 percent at the end of first quarter off 2003. As might be expected, delinquency rates on credit cards were higher. The highest delinquency rate was 4.80 percent at the end of 2002. Three months later the delinquency rate had fallen to a low of 4.41 percent. We suspect that there were some accounts charged off at the end of 2002.

Source: Federal Reserve Board

Data are seasonally adjusted. Delinquent loans are those accounts past due 30 days or more accruing interests, as well as those in a non-accrual status measured as a percentage of end-of-period loans.

The Consumer Bankers Association (CBA) recently released still another study with its 2003 Consumer Credit Collections Study, conducted by Benchmarks Consulting International. The results of the survey show that the dollar amount of consumer loans that were delinquent at the end of 2002 dropped to 1.34 percent from 1.86 percent a year earlier. Overdraft protection had the highest dollar delinquency rate at 2.8 percent, well above the lowest rate of delinquency of only 0.7 percent on home equity loans. Delinquency rates on credit card accounts remained at 3.0 percent. Interestingly, bankruptcies were reported on 32 percent of the credit card charge-offs in 2002 vs. 25 percent the previous year.